Energy Development in Utah

Weighing the Costs and Benefits

Heather Stewart

August 1, 2011

Gov. Gary R. Herbert sent a strong message to Washington during his State of the State address in January. “I remind Washington,” he said, “we are a state, not a colony, and I assure you, on my watch, Utah will not stand idly by.”

What had Herbert taking such a firm fighting stance? Well, many issues, ranging from immigration to healthcare reform—but also access to federal lands and the energy resources they contain.

The federal government owns 70 percent of the land in Utah, most of it under the purview of the Bureau of Land Management. In fact, the BLM oversees 23 million acres of surface land and 32 million subsurface acres in Utah (the agency controls subsurface mineral resources on tribal lands and U.S. Forest Service lands, among others).

The BLM has a complicated mandate from Congress: it must both preserve and protect the land, and allow access for agriculture, recreation, energy extraction and many other purposes.

“[Congress] gave us quite a tall glass of water to drink,” says Juan Palma, director of the Utah BLM. Not every possible use—recreation, wilderness preservation, energy development—can take place on each square acre of land, so the agency must find the most appropriate use for each piece of land.

Coal mines are abundant in Central Utah, while the Uinta Basin in the northeastern part of the state is being tapped for its crude oil and natural gas. In fact, Uintah, Duchesne and Carbon counties are home to nearly all of the oil and gas operations in the state.

The area is also rich in oil shale and tar sands—a resource that has yet to be successfully unlocked on a grand scale. With the potential for producing billions of gallons of oil, the area has caught the attention of inventors and investors determined to transform solid rock into black gold.

For better or for worse, the economy of the Uinta Basin is tied to energy development.

“The energy industry in one form or another—it’s our lifeblood,” says Tammie Lucero, executive director of economic development for Uintah County. She points out that 65 percent of all natural gas used in the entire state comes from Uintah County.

The economic impacts can be felt in many ways. Energy companies pay leasing fees to use public land, as well as taxes on their revenues. If the land is state owned, the company must pay royalties to the Utah State Trust Lands Administration (STLA), which benefits the state’s educational system.

And, of course, energy development provides quality jobs in a rural region.

“In Uintah County, 60 percent of their employment is through oil and gas; 80 percent of their income—salaries, taxes, revenues—comes from the oil and gas industry. Uintah County is dependant upon the oil and gas industries for their survival,” says Brad Miller, general manager of regulatory affairs for Anadarko, a global energy company.

Based in Texas, Anadarko is the largest producer of natural gas in Uintah County—and in the entire state. According to Miller, the company produces 550 million cubic feet of natural gas per day in Utah, enough to heat 2 million homes every day.

“Anadarko employs 200 people [in Utah] directly. Any given day, we run about 600 contractors, so we’re a significant employer in the Basin,” he says. “In the past four years, we’ve paid $630 million in taxes, royalties and salaries.”

Furthermore, he says Anadarko has spent $2 billion in Uintah County over the past four years. The company drills about 250 wells each year, and Miller says, “We plan to continue that or ramp it up going forward.”

A Fight with the Feds
Despite a recent uptick in drilling, Lucero believes the industry is being thwarted and fears for the economic stability of the Basin.

“[The industry] could be booming, but the federal government has made it unfriendly to do energy business in Uintah County,” she says. A major sticking point has been the number of new leases issued by the BLM. “Several years ago, they had 1,300 leases in Uintah County to drill in one year—that was in the boom cycle…Last year, the BLM did not even give out 100.”

The difficulty in obtaining leases or permits to drill is making companies think twice about doing business in Utah, according to Lucero.